Olddog wrote:

Maybe that when your cancellation numbers are mostly conversion orders registered that way ?

Good point. Cancellations can also be conversions. It is why we have to be careful just looking at gross orders numbers.

benbeny wrote:

How in the world they're able to find enough pax (and airports) for that amount of new planes every month? Even with ultra-rapid growth of LCC in Asia and other places, I don't see enough pax to fill them up. The market will soak up eventually, and the growth will slow down. And let's not talk about airport congestion everywhere.

Now, we can talk about the real bubble here.

In Asia they are building large airports in sometimes less than 3 years. The problem is not the airports, it is the airspace an air traffic control. Some of these changes to improve capacity will start end of this month, but it needs basically the latest avionics. There is a staggering number of people who each year who can start afford to start flying. A lot of these are people in cities you have never heard of.

Some of these larger orders in Asia are not just for self consumption by the airline that ordered them, they are also setting up lease arms and using their volume discounts from the OEMs.

unrave wrote:

Newbiepilot wrote:

What i see as a problem is how big some of the orders are from relatively small airlines. IndiGo, Air Asia, Lion Air, and Indigo Partners ordered for massive expansion that exceeds market growth rates. That means either those orders wont be fully taken up, may get deferred, or some other airline will be out out of business or shrink (like Monarch or Air Berlin). That could create a bubble of used planes

This reads awfully similar to the hordes of sceptic comments made by Anetters 13 years back when IndiGo placed its first 100 aircraft order. Not only did it take delivery of all of them, it now operates more than 150. Unless some dramatic economic downturn I don't see why an airline that controls 40% of the fastest growing aviation market that is projected to become grow 4x in 20 years wouldn't be able to operate a fleet of 300 aircraft (accounting for replacements). All the jumbo airlines of the world today - Southwest, Ryaniar, Easyjet - would have gone through a similar phase of hectic growth.

Perhaps you didn’t read my entire post. With these orders beyond market expansion rates like IndiGo, either the planes won’t be fully taken up, may get deferred or some other airline will be out of business creating a bubble of used planes. IndiGo and Kingfisher are perfect examples. Both ordered massively. One succeeded and the other failed dumping used planes on the market and eventually resulting in canceled orders.

How many airlines has Southwest helped put out of business resulting in used planes? Same thing with Ryanair and Easyjet. Rapid expansion and high production rates can result in a glut of used airplanes which really hursts lease rates and residual values.

RalXWB wrote:

Sad to see another Anet-myth is still alive. "Most A320 orders are from unstable airlines or won´t be fully taken up or will be deferred or will be cancelled or orderbook inflation or order bubble or whatever". If there is a bubble or something similar it affects all types and not just one type of one producer...smh. If Airbus increases the production rate, they do it for a reason.

It isn’t most orders will be cancelled, deferred, etc. The reality is that Airbus has had a 17% cancellation rate over the past three years when looking at net in year of cancellation. (I averaged three years since last year’s 23% cancellation rate was a bit of an anomaly and some may want to look at numbers differently). This factors in some conversions. The myth is that sales numbers don’t lie. With longer and longer backlogs and bigger and bigger orders stretching longer, there is a level of order inflation going on,

Newbiepilot wrote:

It isn’t most orders will be cancelled, deferred, etc. The reality is that Airbus has had a 17% cancellation rate over the past three years when looking at net in year of cancellation. (I averaged three years since last year’s 23% cancellation rate was a bit of an anomaly and some may want to look at numbers differently). This factors in some conversions. The myth is that sales numbers don’t lie. With longer and longer backlogs and bigger and bigger orders stretching longer, there is a level of order inflation going on,

Absolute numbers don't tell much. How do you assay order changes to different subtypes or to a completely different type.

I'd compare volatility of orders between the big airframers.
( We do have this statement about "Boeing has the "better" customers in their orderbook sitting in the corner.)

WIederling wrote:

Newbiepilot wrote:

It isn’t most orders will be cancelled, deferred, etc. The reality is that Airbus has had a 17% cancellation rate over the past three years when looking at net in year of cancellation. (I averaged three years since last year’s 23% cancellation rate was a bit of an anomaly and some may want to look at numbers differently). This factors in some conversions. The myth is that sales numbers don’t lie. With longer and longer backlogs and bigger and bigger orders stretching longer, there is a level of order inflation going on,

Absolute numbers don't tell much. How do you assay order changes to different subtypes or to a completely different type.

I'd compare volatility of orders between the big airframers.
( We do have this statement about "Boeing has the "better" customers in their orderbook sitting in the corner.)

With all due respect this thread is about Airbus potentially increasing their production rate and some concerns lessors have regarding a bubble. It is not an A vs B, who has the better backlog thread. If Airbus goes up to 70 planes a month and there is a Southeast Asia financial crisis, India has a recession, SARS outbreak, Us stock market collapse, etc there is risk that the rate will be too high and there could be a glut of used planes on the market.

Newbiepilot wrote:

With all due respect this thread is about Airbus potentially increasing their production rate and some concerns lessors have regarding a bubble. It is not an A vs B, who has the better backlog thread. If Airbus goes up to 70 planes a month and there is a Southeast Asia financial crisis, India has a recession, SARS outbreak, Us stock market collapse, etc there is risk that the rate will be too high and there could be a glut of used planes on the market.

you have all the respect I can muster.
To give volatility of orders any meaning you need some comparison ( over the market, over time.)
your admonishment is rather unfounded more of a distraction.

Newbiepilot wrote:

It isn’t most orders will be cancelled, deferred, etc. The reality is that Airbus has had a 17% cancellation rate over the past three years when looking at net in year of cancellation. (I averaged three years since last year’s 23% cancellation rate was a bit of an anomaly and some may want to look at numbers differently). This factors in some conversions. The myth is that sales numbers don’t lie. With longer and longer backlogs and bigger and bigger orders stretching longer, there is a level of order inflation going on,

In the last 3 years Boeing have experienced an 18.5% "cancellation" rate net in the year of cancellation over the last 3 years.
So what are you trying to say?
Are you really trying to suggest that Airbus sit on a 6 200 x A320 backlog and Boeing on a 4 600 x 737 backlog after 17% and 18.5% net "cancellations" respectively? If anything that would indicate the backlogs are even more robust than they look.
These are virtually ALL conversions, for both A and B.
Cancellation can, and do lie.
Airbus have NOT had 17% of net orders cancelled

Ever since I joined this website, Airbus have been criticised for having a more aggressive approach to market share by either
a) taking greater risks than Boeing, or
b) selling at cost or below

I would challenge you to come up with a meaningful statistic that shows that cancellations i.e. NOT conversions, have had a meaningfully different impact on either manufacturer over the last 15 years.
Airbus have a greater proportion of order in the faster growing economies. That is a fact. It is also a fact that this was the case during the GFC in 2008 and 2009.
And yet both production rates and backlogs held up in that period.

From the selling price viewpoint, last year's Airbus results, especially the Q4 ones when some of the inventory got delivered, clearly demonstrate that Airbus are making double digit margin on the A320's they are selling.

So Airbus are not engaging in either speculative orders or dumping just to make up numbers.
This is a bus that A-net needs to disembark from

I get a feeling that some people think that Airbus is run by A-net teenagers.
It isn't.
All of these orders go through strict LCM governance.
And historically it has shown to be robust.

It has been the case over the last 15 years that the 20 year forecast for narrobodys from both manufacturers has consistently gone up, year-on-year

Airbus last year forecast 25 000 narrowbodys over 20 years. In 2010 this number was 17 800
Boeing last year forecast 29 500 narrowbodys over 20 years. In 2010 this number was 21 000.
What are these numbers going to be in c. 2022 which is the earliest that rates like this are likely to be achieved.
The current "order inflation" rate in the OEM's market forecasts is 1000 per year.

Last year Boeing delivered 530 narrowbodys and Airbus delivered (by some miracle or other) delivered 550
That's on target for 21 600 deliveries in 20 years.
It just isn't enough

As an aside, the big two will want to keep the market as saturated as possible to deter new entrants.
If they go up to, say 800 and 700 respectively for A and B by 2022, but have to throttle back briefly to 700 and 600 for a couple of years, is that really a bubble?

Rgds

Any big downturn of the world economy will throw a monkey wrench in those 10K narrow body orders. 9 to 10 years of orders in the backlog is WAY WAAAYYY to much. It means orders of 2017 will be delivered beyond 2026 at the soonest...I would not bet anything to predict the economy of the world for a decade.... just a big volcanic eruption for 2 years would destroy the industry... a trade economic war? and those 2 just off the top of my head... also the amount of resources for engine makers to fulfill and MAINTAIN that huge number of products is staggering ... something´s got to give....

If acquisition and operative costs of bigger aircraft was not that much, I am sure a lot of airlines would be flying A330 and 787 like crazy.... and the backlog of NB would be a lot less...

Best Regards

TRB

astuteman wrote:

Newbiepilot wrote:

It isn’t most orders will be cancelled, deferred, etc. The reality is that Airbus has had a 17% cancellation rate over the past three years when looking at net in year of cancellation. (I averaged three years since last year’s 23% cancellation rate was a bit of an anomaly and some may want to look at numbers differently). This factors in some conversions. The myth is that sales numbers don’t lie. With longer and longer backlogs and bigger and bigger orders stretching longer, there is a level of order inflation going on,

In the last 3 years Boeing have experienced an 18.5% "cancellation" rate net in the year of cancellation over the last 3 years.
So what are you trying to say?
Are you really trying to suggest that Airbus sit on a 6 200 x A320 backlog and Boeing on a 4 600 x 737 backlog after 17% and 18.5% net "cancellations" respectively? If anything that would indicate the backlogs are even more robust than they look.
These are virtually ALL conversions, for both A and B.
Cancellation can, and do lie.
Airbus have NOT had 17% of net orders cancelled

Ever since I joined this website, Airbus have been criticised for having a more aggressive approach to market share by either
a) taking greater risks than Boeing, or
b) selling at cost or below

I would challenge you to come up with a meaningful statistic that shows that cancellations i.e. NOT conversions, have had a meaningfully different impact on either manufacturer over the last 15 years.
Airbus have a greater proportion of order in the faster growing economies. That is a fact. It is also a fact that this was the case during the GFC in 2008 and 2009.
And yet both production rates and backlogs held up in that period.

From the selling price viewpoint, last year's Airbus results, especially the Q4 ones when some of the inventory got delivered, clearly demonstrate that Airbus are making double digit margin on the A320's they are selling.

So Airbus are not engaging in either speculative orders or dumping just to make up numbers.
This is a bus that A-net needs to disembark from

I get a feeling that some people think that Airbus is run by A-net teenagers.
It isn't.
All of these orders go through strict LCM governance.
And historically it has shown to be robust.

It has been the case over the last 15 years that the 20 year forecast for narrobodys from both manufacturers has consistently gone up, year-on-year

Airbus last year forecast 25 000 narrowbodys over 20 years. In 2010 this number was 17 800
Boeing last year forecast 29 500 narrowbodys over 20 years. In 2010 this number was 21 000.
What are these numbers going to be in c. 2022 which is the earliest that rates like this are likely to be achieved.
The current "order inflation" rate in the OEM's market forecasts is 1000 per year.

Last year Boeing delivered 530 narrowbodys and Airbus delivered (by some miracle or other) delivered 550
That's on target for 21 600 deliveries in 20 years.
It just isn't enough

As an aside, the big two will want to keep the market as saturated as possible to deter new entrants.
If they go up to, say 800 and 700 respectively for A and B by 2022, but have to throttle back briefly to 700 and 600 for a couple of years, is that really a bubble?

Rgds

Ok then, so given all that you said, do you think 70 airplanes a month is a reasonable production rate? I intentionally tried to avoid an A vs B discussion, but they have issues too with their production rate and competition if there is a downturn.

astuteman wrote:

I get a feeling that some people think that Airbus is run by A-net teenagers.

Do you really view my post as thinking that? Ouch. My post was in response to RALXWB’s post about a myth that I don’t believe exists.

I am surprised you don’t see the order inflation going on. I understand your points and I have seen some of those exaggerated criticisms of Airbus before, but that doesn’t mean they are all entirely untrue. Do you really think that all the orders from airlines like Frontier, IndiGo, GoAir, Jetsmart, Volaris, Vietjet, Air Asia, Lion Air, etc don’t represent inflation and the potential for a bubble? For all those planes to be delivered, there will likely be some other airlines contracting or going out of business, which could lead to cheaper used aircraft on the market.

Thank you. You nailed it!

astuteman wrote:

Newbiepilot wrote:

It isn’t most orders will be cancelled, deferred, etc. The reality is that Airbus has had a 17% cancellation rate over the past three years when looking at net in year of cancellation. (I averaged three years since last year’s 23% cancellation rate was a bit of an anomaly and some may want to look at numbers differently). This factors in some conversions. The myth is that sales numbers don’t lie. With longer and longer backlogs and bigger and bigger orders stretching longer, there is a level of order inflation going on,

In the last 3 years Boeing have experienced an 18.5% "cancellation" rate net in the year of cancellation over the last 3 years.
So what are you trying to say?
Are you really trying to suggest that Airbus sit on a 6 200 x A320 backlog and Boeing on a 4 600 x 737 backlog after 17% and 18.5% net "cancellations" respectively? If anything that would indicate the backlogs are even more robust than they look.
These are virtually ALL conversions, for both A and B.
Cancellation can, and do lie.
Airbus have NOT had 17% of net orders cancelled

Ever since I joined this website, Airbus have been criticised for having a more aggressive approach to market share by either
a) taking greater risks than Boeing, or
b) selling at cost or below

I would challenge you to come up with a meaningful statistic that shows that cancellations i.e. NOT conversions, have had a meaningfully different impact on either manufacturer over the last 15 years.
Airbus have a greater proportion of order in the faster growing economies. That is a fact. It is also a fact that this was the case during the GFC in 2008 and 2009.
And yet both production rates and backlogs held up in that period.

From the selling price viewpoint, last year's Airbus results, especially the Q4 ones when some of the inventory got delivered, clearly demonstrate that Airbus are making double digit margin on the A320's they are selling.

So Airbus are not engaging in either speculative orders or dumping just to make up numbers.
This is a bus that A-net needs to disembark from

I get a feeling that some people think that Airbus is run by A-net teenagers.
It isn't.
All of these orders go through strict LCM governance.
And historically it has shown to be robust.

It has been the case over the last 15 years that the 20 year forecast for narrobodys from both manufacturers has consistently gone up, year-on-year

Airbus last year forecast 25 000 narrowbodys over 20 years. In 2010 this number was 17 800
Boeing last year forecast 29 500 narrowbodys over 20 years. In 2010 this number was 21 000.
What are these numbers going to be in c. 2022 which is the earliest that rates like this are likely to be achieved.
The current "order inflation" rate in the OEM's market forecasts is 1000 per year.

Last year Boeing delivered 530 narrowbodys and Airbus delivered (by some miracle or other) delivered 550
That's on target for 21 600 deliveries in 20 years.
It just isn't enough

As an aside, the big two will want to keep the market as saturated as possible to deter new entrants.
If they go up to, say 800 and 700 respectively for A and B by 2022, but have to throttle back briefly to 700 and 600 for a couple of years, is that really a bubble?

Rgds

Newbiepilot wrote:

Ok then, so given all that you said, do you think 70 airplanes a month is a reasonable production rate? I intentionally tried to avoid an A vs B discussion, but they have issues too with their production rate and competition if there is a downturn.

astuteman wrote:

I get a feeling that some people think that Airbus is run by A-net teenagers.

Do you really view my post as thinking that? Ouch. My post was in response to RALXWB’s post about a myth that I don’t believe exists.

I am surprised you don’t see the order inflation going on. I understand your points and I have seen some of those exaggerated criticisms of Airbus before, but that doesn’t mean they are all entirely untrue. Do you really think that all the orders from airlines like Frontier, IndiGo, GoAir, Jetsmart, Volaris, Vietjet, Air Asia, Lion Air, etc don’t represent inflation and the potential for a bubble? For all those planes to be delivered, there will likely be some other airlines contracting or going out of business, which could lead to cheaper used aircraft on the market.

I think I answered your first question.
Yes, I think 70 per month is reasonable, even with a bit of "froth" in the market.
It's clear it will take 3-4 years to get there.
And even then at say 800 per year (c 11.5 months per year output) it still represents a backlog of 7 1/2 years production.
That is still too long. I think genuine cancellations will be small. There may be more deferrals
There has never been backlogs this long measured in years of production.
Even if the backlog shrank to say 4 800, which it won't, that would still represent 6 years at 800 a year, plenty of time to adjust if needed
.
I don't see anything materially different to the trend of the last decade. Which for me is a story of strong growth in fragmentation driven by narrobodys.
As a Boeing fan (not "fanboy" I hasten to add) I would have expected you to buy into your company's belief in fragmentation a bit more.
They are clearly right.
That's the "inflation" that I see.
It's not a bubble.

As for the A-net teenager thing - apologies - it was a general statement, and not aimed at your comments specifically.

Is there risk in the backlogs?
Yes. There will be downturns, cancellations, and deferrals.
But there have always been these.
I don't think today is any different

Rgds

I get nervous with 70 per month rates. If oil prices double, that will raise fares and severely slow growth in demand that airlines are relying on when they placed these big orders for expansions. If oil prices jumped and India went into recession causing GoAir and IndiGo to defer deliveries, there could be a lot of white tails (airplanes built with no customer). I don’t know if there are enough opportunistic airlines to fill the production lines at those high rates. It seems like Airbus is evaluating the risk. It may be worth the consequences of oversupply since it will help keep out new entrants.

By the way, Boeing is not my company. Astuteman, I don’t know why you must call me a Boeing fan in this thread. My comments are entirely neutral in this thread. Boeing has concerns with their rates too, but this thread is about Airbus and their production rate.

I absolutely do not get nervous about rate 70 at Airbus. If Airbus takes their A320 family backlog serious, rate 70 is logical. If the economy tanks it tanks and Airbus as well as Boeing will reduce their build rates.
It happens with other successful frames. The A330 was at rate 10 and is now down to rate 6. The 777 was at 8.5 and will go to 3.5. The 787 will be hiked to 14 and that will have to come down in a few years. Orders and production come in waves, that is the way of the industry.

astuteman wrote:

Newbiepilot wrote:

It isn’t most orders will be cancelled, deferred, etc. The reality is that Airbus has had a 17% cancellation rate over the past three years when looking at net in year of cancellation. (I averaged three years since last year’s 23% cancellation rate was a bit of an anomaly and some may want to look at numbers differently). This factors in some conversions. The myth is that sales numbers don’t lie. With longer and longer backlogs and bigger and bigger orders stretching longer, there is a level of order inflation going on,

In the last 3 years Boeing have experienced an 18.5% "cancellation" rate net in the year of cancellation over the last 3 years.
So what are you trying to say?
Are you really trying to suggest that Airbus sit on a 6 200 x A320 backlog and Boeing on a 4 600 x 737 backlog after 17% and 18.5% net "cancellations" respectively? If anything that would indicate the backlogs are even more robust than they look.
These are virtually ALL conversions, for both A and B.
Cancellation can, and do lie.
Airbus have NOT had 17% of net orders cancelled

Ever since I joined this website, Airbus have been criticised for having a more aggressive approach to market share by either
a) taking greater risks than Boeing, or
b) selling at cost or below

I would challenge you to come up with a meaningful statistic that shows that cancellations i.e. NOT conversions, have had a meaningfully different impact on either manufacturer over the last 15 years.
Airbus have a greater proportion of order in the faster growing economies. That is a fact. It is also a fact that this was the case during the GFC in 2008 and 2009.
And yet both production rates and backlogs held up in that period.

From the selling price viewpoint, last year's Airbus results, especially the Q4 ones when some of the inventory got delivered, clearly demonstrate that Airbus are making double digit margin on the A320's they are selling.

So Airbus are not engaging in either speculative orders or dumping just to make up numbers.
This is a bus that A-net needs to disembark from

I get a feeling that some people think that Airbus is run by A-net teenagers.
It isn't.
All of these orders go through strict LCM governance.
And historically it has shown to be robust.

It has been the case over the last 15 years that the 20 year forecast for narrobodys from both manufacturers has consistently gone up, year-on-year

Airbus last year forecast 25 000 narrowbodys over 20 years. In 2010 this number was 17 800
Boeing last year forecast 29 500 narrowbodys over 20 years. In 2010 this number was 21 000.
What are these numbers going to be in c. 2022 which is the earliest that rates like this are likely to be achieved.
The current "order inflation" rate in the OEM's market forecasts is 1000 per year.

Last year Boeing delivered 530 narrowbodys and Airbus delivered (by some miracle or other) delivered 550
That's on target for 21 600 deliveries in 20 years.
It just isn't enough

As an aside, the big two will want to keep the market as saturated as possible to deter new entrants.
If they go up to, say 800 and 700 respectively for A and B by 2022, but have to throttle back briefly to 700 and 600 for a couple of years, is that really a bubble?

Rgds

I would argue Airbus needs to produce more due to their success and marketing style.

I agree A and B want a saturated market. A and B make a profit at sale and too much of the service revenue goes to engines, vendors, and MROs. So both are ok pushing NGs and CEOs to retirement or freight conversions.


And considering only about 1.3 billion to 1.5 billion of the world's population is wealthy enough to fly, I see long turn growth.

But whoever grows first gets economy of scale and will have early slots.

550 A32X aircraft isn't enough.

To others:
Now I agree both engine vendors dropped the ball. Airbus must offer 50% of a production ramp to each vendor. If neither will sign up, with penalties, then Airbus could offer all the added slots to RR assuming they could/would take them.

Airbus wants to kill the MC-21, C919, C-series, and get production costs down to hurt the MAX business profit (tough to do IMHO for both).

I do not see a bad narrowbody glut. I do see a tremendous fuel burn improvement, range improvement, and finally some modern maintenance practices (a la 787 who has seen a plummet in maintenance costs the last two years). Once the software based diagnostic software kicks in (lessons learned from the 787 is turn on alerts later after the algorithms are tested.

This will reduce unscheduled maintenance to such a low event, a quarter of the NEO lease costs will be paid (I include fewer hotel rooms, higher utilization, and fewer meal vouchers).

Lightsaber

If you are nervous with that rate, try to imagine that rate + 10 - 15 CS 100/Cs 300 each month

I wander what all of these NBs A and B does to the lease market. After Indigo finishes using its A320s for five or six years who is buying that aircraft from the lessor? There are only so many Allegiants, Deltas and Uniteds in the world snapping up used aircraft.

http://www.business-standard.com/articl ... 085_1.html

The reason this conversation is related to this thread is that about half of A and B NB backlog will be sale leasebacks, and eventually the returns start competing with the new product. Do not know when we get to that point but it can't be far off.

But I understand Airbus's moves on this, its to monetize the backlog, why wait 7 years when you can get paid in 5.

Olddog wrote:

If you are nervous with that rate, try to imagine that rate + 10 - 15 CS 100/Cs 300 each month

I wonder about that too

william wrote:

But I understand Airbus's moves on this, its to monetize the backlog, why wait 7 years when you can get paid in 5.

Another but. Can they bring CFM and PW along for the ride? Even CFM can't keep up with the current contracted volumes, and PW....

[quote="lightsaber"]I do see a tremendous fuel burn improvement, range improvement, and finally some modern maintenance practices (a la 787 who has seen a plummet in maintenance costs the last two years). Once the software based diagnostic software kicks in (lessons learned from the 787 is turn on alerts later after the algorithms are tested.

This will reduce unscheduled maintenance to such a low event, a quarter of the NEO lease costs will be paid (I include fewer hotel rooms, higher utilization, and fewer meal vouchers). Lightsaber[quote]

As more engines are supplied on OEM maintenance programmes, including increasingly NB engines, the benefits of improved reliabilty and compensation for problems, are reaped by the engine OEM, not the customer. Reliability improvements are shared, but not equally, as engine OEM's are growing margins.

Majority of new WB aircraft leased, have either engines owned by the OEM on plans, or owned by leasor on plans. Leasing company engine exposure is if/when the engines come off plan, or on contract rollover, but many leasors are writing lifetime plans up to 16 years.

william wrote:

I wonder what all of these NBs A and B does to the lease market.

And you wonder why the boss of Aercap doesn't like the production rates....
Who are his biggest competitors?

Rgds

Newbiepilot wrote:

Ok then, so given all that you said, do you think 70 airplanes a month is a reasonable production rate? I intentionally tried to avoid an A vs B discussion, but they have issues too with their production rate and competition if there is a downturn.

Given the backlog and order rate, I’d say 70/month is a necessity.

I was going to mention both OEMs market forecasts, but Astuteman beat me to it. While single-aisle orders are close to meeting the projections, deliveries aren’t.

There were dire predictions of both A & B backlogs being decimated during the GFC but it didn’t happen.

I am surprised you don’t see the order inflation going on. I understand your points and I have seen some of those exaggerated criticisms of Airbus before, but that doesn’t mean they are all entirely untrue. Do you really think that all the orders from airlines like Frontier, IndiGo, GoAir, Jetsmart, Volaris, Vietjet, Air Asia, Lion Air, etc don’t represent inflation and the potential for a bubble? For all those planes to be delivered, there will likely be some other airlines contracting or going out of business, which could lead to cheaper used aircraft on the market.

I don’t see “order inflation”. If you put any store by both OEMs market forecasts, then order rate is pretty close (if anything slightly low). Deliveries need to catch up.

Maybe I am dense, but when these orders (WB or NB, Airbus or Boeing), don't they have a delivery period listed? Then it should be simple enough (even stupid me can put together an Excel spreadsheet) to know what the rate should be. I have to deliver so many in each year contractually, right? Simple math, or simple Bricktop? Discuss.

Bricktop wrote:

Maybe I am dense, but when these orders (WB or NB, Airbus or Boeing), don't they have a delivery period listed? Then it should be simple enough (even stupid me can put together an Excel spreadsheet) to know what the rate should be. I have to deliver so many in each year contractually, right? Simple math, or simple Bricktop? Discuss.

Delivery schedules are very fluid. The more fluid the manufacturer is with slots, the more they can adjust to market demand. Airline delivery schedules change dramatically up until 8-12 months before delivery. Specific production Slots aren’t usually assigned more than 12 months out. Airlines have flexibility in their original sales contracts that usually don’t define specific delivery dates

scbriml wrote:

Given the backlog and order rate, I’d say 70/month is a necessity.

...

I don’t see “order inflation”. If you put any store by both OEMs market forecasts, then order rate is pretty close (if anything slightly low). Deliveries need to catch up.

Hmmm, So Airbus A320 goes to 70 a month, Boeing 737 is already going to 57 a month next year (rumors of 60 or more?), plus C-Series...Sure Asia, Middle-East and Africa are growing...but this translates into close to 150 narrow-bodies a month or 1700-1800 a year and eventually more after 2020. At that rate, the market will have to absorb about 20,000 narrow-bodies in a decade -- that is close to the 20 year forecasts, not ten year...Something is not right here!

And we are now heading into a higher interest rate environment, oil prices are reasonable due to fracking, so no great need to dump older frames...Some talk of 10 to 12 year old A320 and 737NG being scrapped? -- that has to be very rare.

Yes, I'll stick my neck out and call it a bubble !!

QuarkFly wrote:

scbriml wrote:

Given the backlog and order rate, I’d say 70/month is a necessity.

...

I don’t see “order inflation”. If you put any store by both OEMs market forecasts, then order rate is pretty close (if anything slightly low). Deliveries need to catch up.

Hmmm, So Airbus A320 goes to 70 a month, Boeing 737 is already going to 57 a month next year (rumors of 60 or more?), plus C-Series...Sure Asia, Middle-East and Africa are growing...but this translates into close to 150 narrow-bodies a month or 1700-1800 a year and eventually more after 2020. At that rate, the market will have to absorb about 20,000 narrow-bodies in a decade -- that is close to the 20 year forecasts, not ten year...Something is not right here!

And we are now heading into a higher interest rate environment, oil prices are reasonable due to fracking, so no great need to dump older frames...Some talk of 10 to 12 year old A320 and 737NG being scrapped? -- that has to be very rare.

Yes, I'll stick my neck out and call it a bubble !!

Thing is they were ordered with low oil prices though. So they were more economical than old planes with cheap fuel, despite ownership or capital cost. If oil prices rise, the demand for MAX and neo will rise accordingly, just to save the cash flow (sacrificing CAPEX). The freight markets recover and the first NGs/CEOs are in conversion. The markets get even more fragmented, so in the end I imagine the widebodies suffer more than any narrowbody. For me there is no bubble, especially because airlines like AF didn't even decide on future narrowbodies yet.

QuarkFly wrote:

scbriml wrote:

Given the backlog and order rate, I’d say 70/month is a necessity.

I don’t see “order inflation”. If you put any store by both OEMs market forecasts, then order rate is pretty close (if anything slightly low). Deliveries need to catch up.

Hmmm, So Airbus A320 goes to 70 a month, Boeing 737 is already going to 57 a month next year (rumors of 60 or more?), plus C-Series...Sure Asia, Middle-East and Africa are growing...but this translates into close to 150 narrow-bodies a month or 1700-1800 a year and eventually more after 2020. At that rate, the market will have to absorb about 20,000 narrow-bodies in a decade -- that is close to the 20 year forecasts, not ten year...Something is not right here!

And we are now heading into a higher interest rate environment, oil prices are reasonable due to fracking, so no great need to dump older frames...Some talk of 10 to 12 year old A320 and 737NG being scrapped? -- that has to be very rare.

Yes, I'll stick my neck out and call it a bubble !!

All the narrowbody OEM's between them punched out about 1150 narrowbodys in 2017.
There's no way on earth they will even reach 1700-1800 a year before 2022/2023.
They're all powered by the same pair of engines for a start - the engine OEM's alone won't be able to sustain higher growth than that.

So let's say 1 700 per year by end 2022.
On current trends, the Boeing 2022 CMO will be forecasting 34 000 - 35 000 narrowbodys over 20 years.
So 1 700 per year in 2022 is more likely to be in the ball-park than an outlier.

Bringing the post round to Airbus specifically, the A32X has secured 5 000 net orders in the last 5 years.
But Airbus have only been able to deliver 2 500 in the same period - 490 in each of 2013, 2014 and 2015, and 550 in each of 2016 and 2017.

To model a "bubble" for the A320 series..
Suppose that net A320 orders over the next 5 years shrink to 2 000 in total.
That's 400 a year average for the next 5 years.

If I assume that Airbus hit the "800 per year" rate at the end of 2022, then they will go into 2023 with:-
A production rate of 800 planes
A backlog of 4 800 planes
6 years worth of production still to consume even at that rate.

400 per year for the next 5 years in MILES below either trend, or forecast.
It's a pretty vicious bubble model.
It would bring net orders for the A320 in the 10 year period of 2013-2022 inclusive to 7 000 planes.
700 planes per year, which is definitely in the ball-park.

There might be an order bubble but there is absolutely no production bubble.
Quite the opposite, in fact.
If the big 2 don't get onto this, the emerging players are going to fill the production gap.
They really do need to get a move on.
Honest

Rgds

This is exactly what the economists are predicting, eg http://avolon.aero/wp/wp-content/upload ... F_2014.pdf

LA704 wrote:

Thing is they were ordered with low oil prices though. So they were more economical than old planes with cheap fuel, despite ownership or capital cost. If oil prices rise, the demand for MAX and neo will rise accordingly, just to save the cash flow (sacrificing CAPEX). The freight markets recover and the first NGs/CEOs are in conversion. The markets get even more fragmented, so in the end I imagine the widebodies suffer more than any narrowbody. .

I’d like to go a little deeper into your great post and reflect on how it relates to 70 planes month production rates. I have been thinking about oil prices effecting the industry and looking at the past and I am not sure MAX and NEO demand will actually increase if oil prices go up. Higher oil prices logically will push airlines to retire old airplanes and buy more efficient ones. Here is my logic:

Factors
1. Oil Prices Go up, economies slow down
2. Fast growing airlines slow growth rate since ticket prices rise
3. Legacy airlines conserve cash and retire older airplanes
4. High oil prices lead to inflation increasing borrowing costs
5. Airlines replace older airplanes with more efficient airplanes

So which factor has the biggest effect?

I could see factor 2 resulting in Air Asia, IndiGo, Indigo partners, etc slowing growth because higher prices will reduce growth demand in those markets. That could result in order deferrals.

Factor 3 is pretty obvious. If oil prices jump, Deltas MD88s and 757s will be parked really quickly for example as they continue to get new deliveries. Some of those older planes could become freighters although that part of the market isn’t that huge. So far 737-800s used are a bit expensive to be converted to freighters for some freight operators. High oil prices will drive them to replace older equipment and cheaper A320s and 737s could help.

Factor 4 has been a bit of a mystery. Airplane financing is coming from banks in Europe, Middle East, North America and China. Unlikely all will be hit hard at once, but higher interest rates make new planes more expensive.

Factor 5 I think was your point. Is it strong enough to overcome all three of the other factors? Perhaps it will in the right economic climate.

zeke wrote:

This is exactly what the economists are predicting, eg http://avolon.aero/wp/wp-content/upload ... F_2014.pdf

I think the chart on slide three is particularly useful when talking about the impact of higher oil prices

Consequently, 40% of all deliveries over the next 20 years will be used to replace current fleet retirals (Chart 6),

If 60% of deliveries are for growth, higher oil prices will hurt this number. The A320neo order book has a number of high growth customers, but fortunately it is balances with replacement orders as well to fill in gaps created if oil prices go up slowing down some growth airlines

So in the end, what does this mean? I think it means it is really hard to make accurate predictions on how economic influences will change demand for airplanes. I am glad I am not the one making rate decisions at a manufacturer. There are so many factors to consider!

astuteman wrote:

Newbiepilot wrote:

Ok then, so given all that you said, do you think 70 airplanes a month is a reasonable production rate? I intentionally tried to avoid an A vs B discussion, but they have issues too with their production rate and competition if there is a downturn.

astuteman wrote:

I get a feeling that some people think that Airbus is run by A-net teenagers.

Do you really view my post as thinking that? Ouch. My post was in response to RALXWB’s post about a myth that I don’t believe exists.

I am surprised you don’t see the order inflation going on. I understand your points and I have seen some of those exaggerated criticisms of Airbus before, but that doesn’t mean they are all entirely untrue. Do you really think that all the orders from airlines like Frontier, IndiGo, GoAir, Jetsmart, Volaris, Vietjet, Air Asia, Lion Air, etc don’t represent inflation and the potential for a bubble? For all those planes to be delivered, there will likely be some other airlines contracting or going out of business, which could lead to cheaper used aircraft on the market.

I think I answered your first question.
Yes, I think 70 per month is reasonable, even with a bit of "froth" in the market.
It's clear it will take 3-4 years to get there.
And even then at say 800 per year (c 11.5 months per year output) it still represents a backlog of 7 1/2 years production.
That is still too long. I think genuine cancellations will be small. There may be more deferrals
There has never been backlogs this long measured in years of production.
Even if the backlog shrank to say 4 800, which it won't, that would still represent 6 years at 800 a year, plenty of time to adjust if needed
.
I don't see anything materially different to the trend of the last decade. Which for me is a story of strong growth in fragmentation driven by narrobodys.
As a Boeing fan (not "fanboy" I hasten to add) I would have expected you to buy into your company's belief in fragmentation a bit more.
They are clearly right.
That's the "inflation" that I see.
It's not a bubble.

As for the A-net teenager thing - apologies - it was a general statement, and not aimed at your comments

Is there risk in the backlogs?
Yes. There will be downturns, cancellations, and deferrals.
But there have always been these.
I don't think today is any different

Rgds

Regarding you last statement that today is not any different, this quote from page 4 of the study Zeke posted implies the market is different today, but it has been mitigated by Airbus overbooking the production line by 15%

However, it is now recognised that the dynamic of commercial aviation sales, at least for the commodity single aisle types, has undergone a permanent paradigm shift, whereby both OEMs actively over-book their production by 15% or more and employ sophisticated skyline management processes to minimise the risk of “white-tails”.

At the same time, airlines and lessors alike have come to accept that they may need to make fleet commitments 10 years or more into the future. A sense of urgency, at least for the airlines, has been created by the launch of new generation, fuel efficient models in each of the three size categories, that in an environment of high oil prices has accelerated some decisions to replace ageing and inefficient fleets. The Avolon forecast assumes that the new patterns of overbooking, orders and backlog will be broadly sustained into the future, but with some moderation of the rate at which new orders are booked (Charts 11a & 11b). Even if the 15% overbooking profile is excluded from the total backlog, the levels fall by less than 18 months’ of production, leaving them still materially above the previous “normal” level.


Overbooking might be the solution to get them through an economic downturn.

The situation is really very simple, you have customers that order merchandise and you run a production to fulfill those orders. It makes more sense for Airbus to go to 70 frames a month on the A320 family, than it is for Boeing to go to 14 a month on the 787 family.

Couldn’t agree more, I think it also makes more sense to have the FAL production expansion outside of Europe.

The new FALs I think are easier to expand.

mjoelnir wrote:

The situation is really very simple, you have customers that order merchandise and you run a production to fulfill those orders. It makes more sense for Airbus to go to 70 frames a month on the A320 family, than it is for Boeing to go to 14 a month on the 787 family.

From a pure numbers point I won’t dispute how simple it sounds. The problem is the two years it takes to adjust production rates and whether or not the supply chain can support it. It is rather apparent the engine production lines are a problem. There likely are other challenging areas too that aren’t getting the media attention. Galleys, lavatories, and seats were a big problem on the A350 recently. Those components don’t sound the most complicated, but they can stop deliveries.

The production challenge is one side making it harder to ramp up production and then risk white tails and overproduction due to economic factors is on the other side if production is too high. Determine ideal production rate is far from simple.

Is 70 the best rate? Time will tell if Airbus decides to do so. I believe they are studying it from the original information posted in this thread.

]

zeke wrote:

Couldn’t agree more, I think it also makes more sense to have the FAL production expansion outside of Europe.

The new FALs I think are easier to expand.

Why is that? The new production lines rely on shipping mostly already fabricated components and then assembling them. Wing production, engines, fuselage structure, etc isn’t being produced locally In the Final Assembly Lines outside of Europe. The long lead parts are still made together as far as I know.

The ramp rate will be determined by engines. But after 2019, the ramp is DONE. At that point both CFM and Pratt will be looking for new customers. Why wouldn't Airbus want to be that customer?

william wrote:

I wander what all of these NBs A and B does to the lease market. After Indigo finishes using its A320s for five or six years who is buying that aircraft from the lessor? There are only so many Allegiants, Deltas and Uniteds in the world snapping up used aircraft.

http://www.business-standard.com/articl ... 085_1.html

The reason this conversation is related to this thread is that about half of A and B NB backlog will be sale leasebacks, and eventually the returns start competing with the new product. Do not know when we get to that point but it can't be far off.

But I understand Airbus's moves on this, its to monetize the backlog, why wait 7 years when you can get paid in 5.

Airbus is more concerned about having slots for new sales to smooth out any downturn. Airbus wants into the US3 replacement market. Airbus wants to sell more A321LRs while the type is viable (it will only be a 7 to 9 year sales window... that is just the nature of that range of aircraft).

Per Zeke's link, we need more production. Who? Airbus doesn't want to leave unmet demand.

My take is that there are so many billions of people trying to claw their way into the middle class. The issue will be airport access.
Not an issue for Denver, most of Texas & Florida, and quite a few other states in the USA. So what if the NE and West coast will be impacted? That just means economic growth must go elsewhere.
China will have no issue (new Beijing Daxing airport, more runways at PVG, CAN, and quite a few others and the building of more than a few regional airports that I question if they will ever see service except under political pressure.
Africa is growing. If Ethiopian can expand there hub, it will be the hub Africa has begged for. In particular, a great hubbing location for connections to Asia including South East Asia (e.g., Vietnam processes nuts exported from Africa).
The ME3 aren't dead.
Europe lacks hub growth, that just means more growth for LCCs at secondary airports and opportunity for the new IST and SVO's expansion.
South America needs more hub capacity. Either Panama is going to have a golden Era or Brazil and Chile will play spoiler.
Poor US policies (transit visas) give an opportunity for a new Europe to South America/Caribbean hub.
The so called Asian Tigers (Thailand, Malaysia, Indonesia, and Singapre) need more hub capacity. Only Malaysia is providing the runways.

The unknown is India. India is direly short of hub capacity. Oh well, I guess the ME3 will have to do the job.

Newbiepilot wrote:

Olddog wrote:

If you are nervous with that rate, try to imagine that rate + 10 - 15 CS 100/Cs 300 each month

I wonder about that too

That is what Airbus is trying to prevent. 120 to 180 C-series per year creates a viable resale and maintenance markets. If Airbus can put airlines under contract before the C-series thrives, they can severely wound it and prevent competition.

Airbus is also trying to take the wind out from under the wings of the MC-21 (a very viable concept, in particular for high density configurations) and the C919 (a very political concept). If those two aircraft are competing against many NEOs... they will have a tough time.


This is exactly what the economists are predicting, eg http://avolon.aero/wp/wp-content/upload ... F_2014.pdf
Per your link, 21,600 new aircraft for growth and 14,700 for replacement (retirements) or 36,300 new aircraft required over 20 years or 1,815 aircraft per year.

Aircraft production needs to increase to meet that goal.

Lightsaber

mjoelnir wrote:

The situation is really very simple, you have customers that order merchandise and you run a production to fulfill those orders. It makes more sense for Airbus to go to 70 frames a month on the A320 family, than it is for Boeing to go to 14 a month on the 787 family.

It makes sense for both to expand. Either Boeing expanded or Airbus was given a free ride on A350 expansion.

There is a widebody glut, but it is for types less efficient.

Oh, I just looked at Boeing's CMO, 41,030 or over 2,000 aircraft per year! When will we see that production rate?
http://www.boeing.com/commercial/market ... look-2017/

Airbus is predicting only 35,000 new aircraft:
http://www.airbus.com/aircraft/market/g ... ecast.html

Their modest production increase seems set for that size of market.


Oh... How I wish Pratt hadn't screwed up... multiple times. Again...

Lightsaber

zeke wrote:

Couldn’t agree more, I think it also makes more sense to have the FAL production expansion outside of Europe.

The new FALs I think are easier to expand.

The last FAL expansion for the A320 family happened in XFW and AFAIK there is enough space there for further expansion. Moving a FAL outside of Europe has strategic, political and risk reducing reasons. Perhaps also to open up new sources of skilled workers.

Another option that maybe possible in the future would be an A320 REO, re-engine option. Take an A320 CEO put it through a deep cycle maintenance program to update cabin, avionics and engines. So the replacement market could partially be filled by a recycled aircraft.

Newbiepilot wrote:

mjoelnir wrote:

The situation is really very simple, you have customers that order merchandise and you run a production to fulfill those orders. It makes more sense for Airbus to go to 70 frames a month on the A320 family, than it is for Boeing to go to 14 a month on the 787 family.

From a pure numbers point I won’t dispute how simple it sounds. The problem is the two years it takes to adjust production rates and whether or not the supply chain can support it. It is rather apparent the engine production lines are a problem. There likely are other challenging areas too that aren’t getting the media attention. Galleys, lavatories, and seats were a big problem on the A350 recently. Those components don’t sound the most complicated, but they can stop deliveries.

The production challenge is one side making it harder to ramp up production and then risk white tails and overproduction due to economic factors is on the other side if production is too high. Determine ideal production rate is far from simple.

Is 70 the best rate? Time will tell if Airbus decides to do so. I believe they are studying it from the original information posted in this thread.

Ramping from 60 to 70 just presents the same problems as ramping from 48 to 60, just a question of scale. I assume we will see rate 60 end of this year and preparations will have started to go to 70 by than.
I assume 64 to be possible without building a new FAL, TSN and BFM could move to 8 a month.

Airbus Ten Year Deliveries Presso Slide by f lee, on Flickr

This is a slide John Leahy loves to use when people asks him about "bubbles". He will say that there is no bubble. He will say that the Airbus delivery numbers are consistently on an increasing trend the past 20 years, no matter what the order numbers may show. As we all know, deliveries determine the revenues of the company.

So, why are people still talking about order bubbles?

flee wrote:

So, why are people still talking about order bubbles?

Some of us remember 2003 and/or 2009. Many in the industry were laid off due to cycles and remember them. Going down in rate and the consequences of it can be very painful. I am not saying 70 per month is sustainable, and I agree bubble may be the wrong word, but these huge order backlogs do represent a shift in the industry

Newbiepilot wrote:

flee wrote:

So, why are people still talking about order bubbles?

Some of us remember 2003 and/or 2009. Many in the industry were laid off due to cycles and remember them. Going down in rate and the consequences of it can be very painful. I am not saying 70 per month is sustainable, and I agree bubble may be the wrong word, but these huge order backlogs do represent a shift in the industry

One could argue the business is just getting more mature now. There was a time when a car was special.
And counting in inflation, etc I think aircraft are just cheaper by comparison. Hopefully one time all of us will own a jet. Perhaps at the cost of the pilot becoming a bus driver...

Newbiepilot wrote:

flee wrote:

So, why are people still talking about order bubbles?

Some of us remember 2003 and/or 2009. Many in the industry were laid off due to cycles and remember them. Going down in rate and the consequences of it can be very painful. I am not saying 70 per month is sustainable, and I agree bubble may be the wrong word, but these huge order backlogs do represent a shift in the industry

Per the Airbus production graph, rates haven’t dipped anywhere, yes there were a couple of flat years post 2001. Compare that to Boeing’s production over the same period and it looks like a mountain range - all peaks and troughs.

One of the significant benefits of a huge backlog is the flexibility it gives. For every airline that’s desperate to defer deliveries there’s one that is just as desperate to take early delivery.

Even if Airbus lost 25% of their A32x backlog, 70/month is still required, IMHO.

Newbiepilot wrote:

Overbooking might be the solution to get them through an economic downturn.

For what its worth, I think Airbus for certain (and I presume Boeing too) began the process of overbooking slots to an extent around the time of the GFC.
It is what allowed them to continue to grow production throughout the GFC period. I don't think that has really changed much in the last 10 years.

But it would support my view that there is more froth in the orders than there is in the production rates.

If you look at the illustration I produced, that "froth" could come out of the orders and still support A320 deliveries around 800 per year by 2023, and narrowbody deliveries of 1700-1800 per year across the industry around the same time.

Newbiepilot wrote:

Some of us remember 2003 and/or 2009. Many in the industry were laid off due to cycles and remember them. Going down in rate and the consequences of it can be very painful. I am not saying 70 per month is sustainable, and I agree bubble may be the wrong word, but these huge order backlogs do represent a shift in the industry

My memory is that the 2002-2003 downswing was incredibly US - centric, and it wouldn't surprise me if the US manufacturers had heavy labour cut-backs at that time. If you look at the chart posted by Flee, there was very little downturn in Airbus deliveries in that period. They seem to have been less exposed to the US downturn.

As you can see, throughout the GFC (2008-2010 ish) Airbus deliveries continued to grow. I do remember that there was a HUGE amount of slot management going on during that time - it certainly wasn't plain sailing. But facilitated by the "overbooking".

As for the huge order backlogs, you are right. They asolutely DO represent a shift in the industry. And I referred to it earlier.
If you look at the orders and backlogs over the last decade, there has been, and continues to be, a HUGE shift towards narrowbodys, as the short/medium haul market has fragmented hugely. The widebody market has shown nothing like the same growth.

I think it began around the turn of the century, when aircraft with the capability of the 737NG, and improved A32X became available, and the small/medium widebody routes got fragmented by the narrowbodys. I think the NEO and MAX have accelerated that process even more, and in doing so, have of course also prompted the extensive debate about a MOM style aircraft - a concept I'm still on the fence with, but we'll see.

IMO passenger growth is being driven far more by narrowbodys than it is by widebodys. That's the market shift that we're seeing.
And why this thread exists.

Rgds

The only credible way to show the A320neo backlog is healthy is by increasing the production rate.

So, seventy aircraft per month it is.

lightsaber wrote:

Oh, I just looked at Boeing's CMO, 41,030 or over 2,000 aircraft per year! When will we see that production rate?
http://www.boeing.com/commercial/market ... look-2017/

Airbus is predicting only 35,000 new aircraft:
http://www.airbus.com/aircraft/market/g ... Lightsaber

zeke wrote:

This is exactly what the economists are predicting, eg http://avolon.aero/wp/wp-content/upload ... F_2014.pdf

A lot of happy talk on this thread -- like pre-financial bubble..."It goes on forever !!" ...

Single-isle forecasts over the next 20-years...Airbus:24807, Boeing: 29530, Avalon: 25300 ...But each of these forecasts include 100-seat aircraft too...such as as E190/95,, CRJ-100 and CS100 -- Also it is possible C919 could take a decent chunk of the China market over the next 20 years So drop the A320 -737 forecasts to less than 25K frames, maybe a lot less (I love C-series )

1250 aircraft a year is 25K frames in twenty years...we are above that production rate now at the beginning of the 20 year time-frame !! That's what's wrong here! Some 20-year possibilities...

- High interest rates make financing much more difficult,

- Alternative energy and high-speed rail (China) drop fuel prices so that well maintained A320 / 737NG stay in fleets for 25-30 years.

- NMA and/or A321X 250-passenger aircraft siphon off demand from A320 / 738 ...e.g. LCC routes become 2-3 times per day with 250 passengers instead of 4-5 times per day with 150 passengers...Freeing up aircraft and reducing deliveries.

- North Korea, Middle-East is a mess...

- MAGA and Brexit politicians screw up the world economy, etc.

And it is possible for forecasts to be too high (A380, 747-8). There has not been a "Turn Out the Lights" downturn in Seattle or Toulouse for decades...it can happen. Nobody ever predicts it ahead of time, and aircraft down-cycles can be ugly.

QuarkFly wrote:

lightsaber wrote:

Oh, I just looked at Boeing's CMO, 41,030 or over 2,000 aircraft per year! When will we see that production rate?
http://www.boeing.com/commercial/market ... look-2017/

Airbus is predicting only 35,000 new aircraft:
http://www.airbus.com/aircraft/market/g ... Lightsaber

zeke wrote:

This is exactly what the economists are predicting, eg http://avolon.aero/wp/wp-content/upload ... F_2014.pdf

A lot of happy talk on this thread -- like pre-financial bubble..."It goes on forever !!" ...

Single-isle forecasts over the next 20-years...Airbus:24807, Boeing: 29530, Avalon: 25300 ...But each of these forecasts include 100-seat aircraft too...such as as E190/95,, CRJ-100 and CS100 -- Also it is possible C919 could take a decent chunk of the China market over the next 20 years So drop the A320 -737 forecasts to less than 25K frames, maybe a lot less (I love C-series )

1250 aircraft a year is 25K frames in twenty years...we are above that production rate now at the beginning of the 20 year time-frame !! That's what's wrong here! Some 20-year possibilities...

- High interest rates make financing much more difficult,

- Alternative energy and high-speed rail (China) drop fuel prices so that well maintained A320 / 737NG stay in fleets for 25-30 years.

- NMA and/or A321X 250-passenger aircraft siphon off demand from A320 / 738 ...e.g. LCC routes become 2-3 times per day with 250 passengers instead of 4-5 times per day with 150 passengers...Freeing up aircraft and reducing deliveries.

- North Korea, Middle-East is a mess...

- MAGA and Brexit politicians screw up the world economy, etc.

And it is possible for forecasts to be too high (A380, 747-8). There has not been a "Turn Out the Lights" downturn in Seattle or Toulouse for decades...it can happen. Nobody ever predicts it ahead of time, and aircraft down-cycles can be ugly.

Please point me to one Airbus or Boeing study that over predicted demand. All I've seen significantly underpredicted demand.

High interest rates only come if countries like China are willing to let their currency rise with the associated plunge in exports. I expect higher rates, but only approaching the historical 7%. The Euro is done if it goes higher.

Growth is moving to Asia. Later maybe Africa and South America. I can dream countries move up the corruption index...

Lightsaber

lightsaber wrote:

Please point me to one Airbus or Boeing study that over predicted demand. All I've seen significantly underpredicted demand.

I'll give you a segment -- I did mention the VLA (A380, 747-8) forecasts of Airbus...and even Boeing were way on the high side and B was downplaying VLA. They can get it wrong.

lightsaber wrote:

High interest rates only come if countries like China are willing to let their currency rise with the associated plunge in exports. I expect higher rates, but only approaching the historical 7%. The Euro is done if it goes higher.

Hmmm, I say 7% commercial rates on aircraft financing wreaks havoc with the above forecasts! -- the last 20 years of A and B orders have been with nearly free money...

...And how is the Euro being "done" or China devaluing its currency (increasing A and B aircraft cost to Chinese carriers) in any way positive for deliveries?

And suddenly both are heading for 70
https://leehamnews.com/2018/02/19/airbu ... -analysis/

is this some kind of third party induced rumor ping pong between AB and BA ?

I think that Airbus has more need to get to 70 - but Boeing is scared of getting left behind as it knows availability of slots is a big plus for the 737 (only vis-a-vis the 320 family)

I assume 64 to be possible without building a new FAL, TSN and BFM could move to 8 a month.

AFAIK the facilities at TSN and BFM are sized for 4/month. There have been talks of increasing that, but it would imply expanding facilities.

The last FAL expansion for the A320 family happened in XFW .

That's right, XFW recently got a 4th FAL, built in former A380 facilities after the A380 ramp-down. However, A320 cabin outfitting for the TLS built aircraft was moved to TLS.
XFW (I believe the 3rd FAL) is the blueprint upon which the BFM and TSN sites are built, following a standardized model. Also, it looks like Airbus is building their new FAL's in modular "building blocks" of 4/month FALs. So TSN & BFM would have to get another "building block" to go to 8.
TLS is the odd FAL in the group, as it can only build A320's and up to recently didn't perform any cabin outfitting.